Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/84313
Authors: 
Coloma, Germán
Year of Publication: 
2007
Series/Report no.: 
Serie Documentos de Trabajo, Universidad del CEMA: Área: economía y derecho 357
Abstract: 
This paper develops a game-theoretic model of a contract between a creditor and a debtor where equilibrium depends on the damage rule chosen for breach-of-contract situations, the use of impossibility-of-performance excuses and the level of legal contract enforceability. We find that, under perfect legal enforceability, the different alternative damage rules (based on expectation or reliance damages, with or without performance excuses) are able to induce an efficient performance by the contracting parties. But we also find that, if legal enforceability is imperfect, then a rule based on expectation damages with an excuse for impossibility of performance is able to work more efficiently than the other alternative damage rules.
Subjects: 
breach of contact
impossibility of performance
legal enforceability
JEL: 
K12
Document Type: 
Working Paper

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